Jan 17, 2026
It’s a story as old as America itself: immigrants in this country, who sought work and opportunity in the U.S., send money across borders and seas to support loved ones back home. For millions of families around the world, that money is a lifeline. But now, sending it is getting more expensive for some Americans.
Buried inside the massive tax and policy bill President Donald Trump signed into law on July 4 is a new federal tax on remittances.
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Beginning Jan. 1, a 1% tax will apply to certain international money transfers, marking a rare instance of a new tax introduced under a Republican-backed bill that otherwise focused on tax relief.
Payments Dive notes the levy is smaller than originally proposed — lawmakers initially floated a rate as high as 5% before dialing it back (1) — but critics say it still lands squarely on working families already grappling with rising living costs.
According to Politico, the tax is expected to raise nearly $10 billion annually for the U.S. Treasury once fully implemented (2).
How the new remittance tax works
While the new rule doesn’t apply to every type of international transfer, it will affect people who rely on more traditional methods to send money abroad.
Under the law, the 1% tax applies only to remittances made using cash, checks or money orders, according to Payments Dive. That includes wiring money using services like Western Union. Transfers made using credit cards, debit cards, prepaid cards or digital money services are exempt (3).
For example, someone sending $5,000 overseas using a money order would owe an additional $50 to the federal government. While that may sound modest, the cost could add up quickly for families who send money regularly.
And while digital transfer services and card-based payments remain outside the scope of the tax, those services often come with their own transaction fees or unfavorable exchange rates. That means the cheapest option on paper isn’t always so in practice.
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Why it matters right now
Remittances play a massive role in both household finances and the global economy. Immigrants living in the U.S. sent a collective $79 billion to their home countries in 2022, according to the International Organization for Migration. The organization also notes that, for decades, the U.S. has consistently been the top remittance-sending country (4).
That figure represents money sent to support parents, children, siblings and extended family members, often for necessities like housing, food, education and medical care.
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The new tax arrives at a time when many Americans are already feeling financially stretched. Inflation has cooled from its peak but remains elevated, while housing, food and borrowing costs continue to strain household budgets.
And policy experts warn the impact of the new tax could go far beyond a modest fee.
The Overseas Development Institute, a global policy think tank, notes that remittances are often a primary lifeline for families abroad. It cautioned that taxing remittances could be “counterproductive,” reducing household stability and weakening one of the most effective tools for poverty reduction tied to migration (5).
The politics behind the policy
Supporters of the tax have used anti-immigrant rhetoric to justify it. The White House and Republican lawmakers have described the measure as a way to target undocumented immigration. A statement promoting the legislation from the House Ways and Means Committee said, “Illegal immigrants will now pay taxes on remittances sent to foreign countries” (6).
But the tax applies broadly, regardless of immigration status. And it’s worth noting that legal immigrants already pay tax on their incomes, meaning that, with this new charge, they technically pay more tax than undocumented immigrants, who may not be filing income taxes.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
How to keep the new tax from eating into your budget
For now, the most straightforward way to sidestep the new tax is to avoid cash, check or money-order transfers altogether.
Using digital money services or sending funds via debit, credit or prepaid cards can keep your transfer exempt from the 1% surcharge. Before switching methods, though, it’s worth comparing total costs — including service fees and potentially inflated exchange rates — to make sure you’re actually saving money.
If you regularly send funds abroad, it's smart to review your options as soon as possible. Small changes in how you move money could prevent a slow drip of extra costs that quietly eat into your budget over time. For families who depend on remittances, here and abroad, that planning could make all the difference.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Payments Dive (1); Politco (2); Western Union (3); International Organization for Migration (4); Overseas Development Institute (5); House Ways and Means Committee (6)
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With a writing and editing career spanning over 13 years, Emma creates and refines content across a broad spectrum of industries, including personal finance, lifestyle, travel, health & wellness, real estate, beauty & fitness and B2B/SaaS/tech. Her versatility comes through contributions to high-profile clients like Moneywise, Healthline, Narcity and Bob Vila, producing content that informs and engages, along with helping book authors tell their stories.
